NEW DELHI: The government has ordered a CBI inquiry into the country’s biggest multi-score stock market scam involving the three banks, the state Bank of India, the National Housing Bank and the United Commercial Bank. The announcement was made by the Union Finance Minister, Dr. Manmohan Singh, in the Lok Sabha.

The Janata Dal member, George Fernandes, created a stir when he asked the minister if the inquiries had revealed that some members of the cabinet had also invested in the shares. When the members demanded to know the names, he said he would do it gradually and slowly. He asked the government if it was not correct that during the income tax raids on Harshad Mehta portfolios of some ministers were also found besides home bureaucrats.” However, it was only the information that he was seeking from the government at the moment, he added.

The issue described as Rs.2500 crore scam came up in both Houses of Parliament but the Lok Sabha witnessed a concerted attack on the government and the entire banking system, as the Finance Minister conceded that prima facie there was a failure of the system and a possible collusion of the bank officials. The minister, however, rejected the opposition demand for a probe by a Joint Parliamentary Committee.  

In the Rajya Sabha, the matter came up briefly during zero hour when Ashish Sen (CPI-M) and Suresh Kalmadi (Cong-I) demanded action against Harshad Mehta, the stock broker. Later, the Finance Minister also made a statement similar to the one made by him in the Lower House as the elders pointed out that he had already made some announcement there.

For more than one-and-a-half hours, it was only the stock market scam in the Lok Sabha as members from all sides demanded stringent action against all those who had colluded with the stock broker.

The Finance Minister also referred to the committee appointed under the deputy general manager of the Reserve Bank with retired experts from the CBI and the income tax Department He defended the chairman of the Reserve Bank and said the members should not cast aspersions on the Reserve Bank and its chairman as the inquiry was already in progress which would be fearless and fair.

Manmohan Singh admitted at the outset that the banking system was in need of a major reform. He said he had appointed a committee to specifically look into the scope for fraud, and then He said with the facts that he knew he did not support the al2 legations made by George Fernandes.  

Article extracted from this publication >> May 22, 1992